AnotherAngleOnFactorDiversification

Last week, we examined the data (from my new book, “Your Complete Guide to Factor-Based Investing,” which I co-authored with Andrew Berkin) on the odds that the premiums associated with some common investment factors would produce a negative return over various horizons.

We then examined how constructing a diversified factor portfolio might impact those odds of underperformance. Today we’ll tackle factor diversification from another angle, by looking at the annualized returns and annual standard deviation of two simple portfolios.